The Bankers Association of the Philippines, the umbrella organization of universal and commercial banks in the country, on Monday, expressed its confidence in the capacity of banks to manage their credit portfolio amid the onslaught of the COVID-19 pandemic and concerns over the non-renewal of ABS-CBN Corp.’s franchise.
It said in a statement the banking industry remained strongly capitalized and in a solid liquidity position to manage credit risks.
“The prudential measures instituted by the Bangko Sentral ng Pilipinas allowed the banking industry to remain strong and healthy through the years that enabled the banks to withstand various crises,” it said.
“In the midst of today’s pandemic and concerns on the non-renewal of the ABS-CBN broadcast= franchise, we strongly believe that banks will continue to be steadfast as they are supported by strong financial conditions, robust risk management systems, and good corporate governance,” it said.
The BAP said member banks are prudent and take the welfare of their depositors at paramount importance.
Global debt watcher Moody’s Investors Service earlier noted the strength of the Philippine banking system, saying it could weather the higher credit risks that might stem from the impact of COVID-19 pandemic.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno also assured that the financial system remained strong. “Based on our reading of a wide array of indicators and our own surveillance of what is happening on the ground, we do not see any indications as of yet that our financial market has been impaired irreparably,” Diokno said in an online briefing following the release by the Financial Stability Coordination Council of the Macroprudential Policy Strategy Framework: The Case of the Philippines on Tuesday.
“The financial system [remains] strong but we must [continue to] be vigilant,” Diokno said. He said the COVID-19 pandemic was a different type of crisis altogether and its impact could be “more severe” even that of the global financial crisis.
“The expectation is for the second-quarter [GDP contraction] to be much worse than the first quarter [of 0.2 percent decline]. The impact of COVID is broader and this suggests that we might have a U-shaped economic recovery,” Diokno said.
He said that “we must not be idle and allow the economy to collapse…”
The interagency Development Budget Coordinating Committee projected a 2-percent to 3.4-percent contraction for the Philippine economy this year amid the pandemic. This is a reversal of the 6-percent expansion a year ago.
GDP contracted by 0.2 percent in the first quarter, a turnaround from the 5.7-percent growth a year ago, and 6.4 percent in the fourth quarter of 2019. The DBCC expects a strong rebound of 7.1 percent to 8.1 percent next year.
Diokno said the release of the strategy framework put the Philippines among the jurisdictions which subscribe to the best practice of publishing their macroprudential policy frameworks.
He said that in the aftermath of the 2007 global financial crisis, “financial stability” became an overarching policy consideration.